Pension scheme 'risk' for poor

Low-income groups could lose out when the Personal Accounts pension system starts in 2012, the Equal Opportunities Commission (EOC) has said.

Under the system, all employees will contribute 4% of salary, matched by 3% from employers and 1% in tax relief.

But the EOC said the money built up in a personal account could bar some from claiming means-tested benefits.

The government said its reforms had a "broad consensus", and added that the accounts were not compulsory.

Scheme 'risk'

The EOC said that some people could find they are worse off under the new Personal Accounts system, losing more in benefits than they gain through personal accounts.

In particular, women, who earn less than men on average, are among those most likely to fall into this trap.

"It will not pay to save for many of those who need this help most, such as those women who can only afford to save a little because they are on low incomes or have broken employment records," said Caroline Slocock, the EOC's chief executive.

"This could damage consumer confidence and put the success of the government's pension reforms at risk."

In response, the government said there was a "broad consensus" around its pension reforms.

"Personal Accounts will provide a low-cost, simple means of saving for retirement and, with a mandatory employer contribution, will offer good incentives to save," James Purnell, Pensions Reform Minister, said.

"But Personal Accounts will not be compulsory; people will have the choice to opt out if they don t think they're right for them," he added.

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